GTE to cut 17,000 jobs in local phone operations

January 14, 1994|By New York Times News Service Bloomberg Business News contributed to this article.

STAMFORD, Conn. -- In the latest big tremor to rock the nation's telephone workers, GTE Corp., the largest local phone company, said yesterday it would cut 17,000 jobs and take a $1.8 billion charge against earnings.

The job cuts, constituting more than 14 percent of GTE's 120,000 workers worldwide, will come primarily from the company's local telephone operations during the next three years. More than one of every five local phone workers and managers will be leaving the payroll.

Although there were few details yesterday about the workforce reductions, analysts said the number and speed of the cuts meant that many would have to come through layoffs rather than the attrition or voluntary retirements GTE has used in past cutbacks.

GTE Chairman and Chief Executive Charles R. Lee called the move "a defining moment for the company."

"We intend to be the market leader in voice, video and data services," Mr. Lee said. "But to do that, you have got to have competitive costs."

Though securities and bond analysts approved of the mammoth cost-cutting plan, investors seemed to shrug. The price of GTE stock dropped 25 cents a share yesterday, closing at $34.625 in moderate trading on the New York Stock Exchange.

GTE, based in Stamford, Conn., is the most recent large phone company to seek cost savings through job cuts. In December, Nynex Corp. was reported to be considering the reduction of 28 percent of its work force, or 22,000 positions in the next three years; Nynex did not confirm those reports but did not rule them out.

Pacific Bell, the local phone unit of Pacific Telesis Group, recently said it will cut 10,000 jobs over the next several years. Earlier in 1993, U S West said it would cut 9,000 positions and take $610 million in related accounting charges.

At GTE, the cuts will mostly come in its traditional land-line telephone business in the United States. They should involve about 12,500 hourly workers and 4,500 managers out of the business' 73,000 employees -- or more than 23 percent.

GTE's operations include the nation's second-largest cellular telephone business after McCaw Cellular Communications, military electronics, the GTE Airfone airline telephone service and telephone-book advertising.

Anticipating the costs of the job cuts and consolidating operations, GTE said it would take a fourth-quarter pretax charge of $1.8 billion, leading to a reduction in fourth-quarter net income of $1.2 billion, or $1.22 a share.

The charge includes $680 million to upgrade or replace many customers' service and administrative systems and software. An additional $160 million has been provided for the consolidation costs. The charge also includes $410 million to cover the job cuts and $50 million for employee training.

The consolidation includes reducing the number of customer contact centers from 171 to 11, the number of revenue collection centers from five to one, and the number of regional centers that monitors GTE's network from 19 to one.

While GTE said the charge would lead to an unspecified loss in the quarter and would diminish full-year earnings, it said future cost savings could total $1 billion a year.

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